BREAKING: HECM Lending Limit Increased



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HECM lending limits increased for the 4th consecutive year

Tuesday, December 3rd FHA released Mortgagee Letter 2019-20 announcing the new maximum claim amount (or lending limit) for Home Equity Conversion Mortgages. The new limit of $765.600 is in effect for the calendar year 2020 and represents a nearly $39,000 increase from last year’s MCA. The move is not an unusual one. Reverse Mortgage Daily reports that the Housing and Economic Recovery Act or HERA mandates that conforming loan limits must reflect changes in the average U.S. home price…

Loan Limits: A ‘What If” Scenario

The potential removal of the HECM’s national loan limit presents disparities in neighboring counties

The updated Housing Finance Reform Plan is ambitious in both its scope and impact on the housing industry and more particularly reverse mortgage industry participants. One of the proposed changes to the HECM (Home Equity Conversion Mortgage) is the removal of the national loan limit and a return to the county-by-county structure of yesteryear. Such a change requires Congressional approval.
[ FHA MORTGAGE LIMIT CALCULATOR ]

In 2019 HUD increased lending limits for most counties across the U.S. However, those unfamiliar with the localized caps may be surprised at local disparities. For instance, the offices of Reverse Focus are located in Shasta County- situated 2 hours south of the Oregon border. The current FHA loan limit for Shasta county is $314,827- a price few homes fall below. Yet just a short 20-minute drive south in Tehama county (where average home sale prices are considerably less) the loan limit is strangely the same- a scenario likely to be replayed throughout the markets of many HECM professionals.

Shasta County, CA 2019 Lending Limit

All which brings us to the question of what if Congress removes the HECM program’s national limit? It would be expected that higher-valued homeowners on both coasts would stand to benefit the most under FHA’s high-cost areas cap under which we’ve functioned since the passage of the Housing & Economic Recovery Act (HERA) of 2008. It would also open a significant opportunity for the creation of private/proprietary reverse mortgages for those with homes that exceed the reduced county limits and fall below today’s cap of $726, 525.

While no PLF (principal limit factor) cuts have been announced, the repeal of the HECM’s national lending limit would cut much deeper for higher-valued homes in lower-cost MSAs.

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Housing Finance Reform Report

 

Loan Limits Didn’t Change…But Does It Matter To Me?

HECM Loan Limits, Lending LimitsThe good news is we just heard that the HECM loan limits will remain the same through December of this year. I’m sure there are many out there who are breathing a little sigh of relief as it buys you some time to get those higher value property owners to get their reverse mortgage in process.

To me it did not really matter, and not because I live in an area that is not affected by the lending limits. I am in Baltimore, a stone’s throw from Washington where the property values have not suffered as much as in other areas of the country. No, the reason it would not affect my reverse mortgage business either way is that I have a plan. And I stick to that plan. Look, there will always be market forces outside of our control. You can beat your head against the wall when something happens, or you can continue to work your plan.

I am certain that those who have a written, detailed plan and are using a coach of some sort to hold them accountable to that plan are going to write loans no matter what market conditions may be. They accept that there will always be some regulation or other occurrence that is out of their control and they move on. What are you doing right now, today to be certain that you will not be sidetracked by things you cannot control? Stay focused, stay on track and continue to help our seniors. They need us now more than ever.